5.6 Innovation HL Only Chapter 35

Research & Development (R&D) Research and development is the scientific research and technical development of new products and processes. –Inventions: discovery of new ideas for products or processes –Innovation: practical application of new inventions into marketable products Product innovation Process innovation

Examples of Product Innovation

Process Innovation A new manufacturing process –Glass manufacturing A new service process –TCBY self-serve –Drive-thru windows –Superstores –Debit cards

Benefits of R&D Spending - Country Creation of high-tech jobs Creation of high-added-value products that may then be manufactured in the country of development Prestige – a country linked to scientific and technological breakthroughs Attraction of investment by multi-national corporations

Benefits of R&D Spending - Companies Competitive advantage over competitors Customer loyalty High, premium prices when first to market Publicity Lower costs

R&D Limitations Does not always lead to new products – there is still no cure for the common cold It is expensive and has an opportunity cost – what else could be done with the money? Competing R&D may lead to other competitive products – Toshiba HD-DVD vs Sony Blu-ray Ethical issues may out weigh commercial benefits – genetically modified food crops, stem cell research

Current R&D projects in NC? Do you know of current R&D projects the NC government (or Charlotte) is trying to encourage?

Intellectual Property Intellectual property refers to the creations of the mind such as –Inventions –Literature –Artistic works such as paintings, theatre, dance –Symbols, names, and images used in business Intellectual property rights is the legal possession and use of the intellectual property

Value of Intellectual Property Intellectual property cannot be destroyed so rights last as long as the law allows Can increase sales because of distinctiveness Be sold or licensed to produce a revenue stream Becomes a key part of branding Is seen as an ASSET and can be placed on the balance sheet with value.

Trademarks Protect registered words, letters, or symbols connected with a company or product. 11

Patents Provides originators the exclusive right to make, use, or sell the item for 17 years. Medicine Schering-Plough patented Claritin now sold as generic Loratadine Sporting Equipment Callaway Big Bertha Iron Golf Clubs 12

Crazy Patents Patent # Animal Ear Protection This invention provides a device for protecting the ears of animals, especially long-haired dogs, from becoming soiled by the animal's food while the animal is eating.

Crazy Patents Patent # Motorized Ice Cream Cone Rotates the ice cream in the cone so you don’t have to.

Crazy Patents Patent # Tricycle Lawnmower Allows you to mow the grass while riding a tricycle bike. As you pedal it turns the mower blade.

Patents to Expire Soon (2012) Pharmaceuticals lose patents every year. –SingularAsthma/Allergy drug –LipitorCholesterol lowering drug –PlavixAnti-Blood clotting drug –AdvairAsthma/COPD drug Other drugs that have gone “off patent” Loratadine (Claritin) – allergy medicine Lansoprazole (Prevacid) – heartburn medication Ibuprofen (Advil) – analgesic

Copyrights Protects the creative works of artists, authors, and composers. In the United States, originators are protected during their lifetime plus 70 years to publish and exhibit their works. 17

Fair Use Allows infringement of copyright law with limited use of copyrighted material under certain situations. Fairy Use Tale 18

Factors Affecting Innovation The nature of the industry –Pharmaceutical products, defense, computer software and hardware, motor vehicles see more need for innovation than hotels and hair dressors R&D budgets of competitors –It may be necessary to keep up with competitors or stay ahead of them Business expectations –If future business profits are optimistic, it is more likely a company will feel that funds will be available for R&D. Culture of the business –Attitude of management determines whether it is important to invest in long-term or short-term research Government policy –Issues grants/tax incentives to business and university research programs Finance is needed –Many firms do not have the cash reserves or financing which will limit R&D ability of the company.